Increased employee healthcare costs set to expand deficit

CITY HALL — Glendale’s employee healthcare costs will increase by roughly 9% this summer, officials said Monday — bad news for a city that is bracing for a multi-million dollar budget deficit.

That increase, effective June 1, will add to the roughly $21.5 million that Glendale paid to cover employee healthcare costs last fiscal year, according to a city report.

Finance Director Bob Elliot, who addressed the Audit Committee on Monday, said it was unclear how much of that 9% increase would be paid by the city, which negotiates employee contributions with each union.

Still, the steeper tab adds to an estimated General Fund budget deficit of up to $15 million for next fiscal year, he said.

“That’s a challenge we’re going to face,” Elliot said.

With three of the city’s four employee unions set to negotiate new contracts this spring, some of the increased medical premiums likely will be covered by employees, he added.

“We will be negotiating with all the groups,” Elliot said. “Rates have gone up, but what the cost share is at this point remains to be negotiated.”

The Glendale Fire Fighters Assn. is the only employee group without an expiring contract this year and will pay 50% of the increased medical costs.

On Monday, city critic Herbert Molano urged the audit commissioners to take a closer look at the city’s budget woes, calling the tab for employee medical benefits “astronomical.”

“I think that the Audit Committee should be looking at these major numbers to provide some sort of clarity or warning, or some other way of highlighting the problem,” he said.

In addition to ballooning pension obligations and the $15 million projected budget gap, city officials will also have to wrestle with the absence of the annual transfer of millions in water revenues from Glendale Water & Power, which last stood at $4.2 million. The City Council halted the practice after city attorneys determined it could be ruled unconstitutional.

Past budget-cutting sessions have resulted in the slashing of more than 100 city positions, with dozens more kept vacant in an ongoing hiring freeze, which has kept about 80 jobs vacant, saving the city between $4 and $6 million, Elliot said. But the City Council still will have make some tough budget decisions this spring.

City executives on Monday began a series of meetings to address potential departmental cutbacks, with a focus on prioritizing city services.

“It’s going to be more of a review in that perspective, with a mind toward trying to focus on what the essential services are,” Elliot said.

The city could see additional financial distress if Gov. Jerry Brown succeeds with his plan to eliminate local redevelopment agencies, which in addition to generating tax revenue for major development projects, also cover a portion of some employee salaries.

“That’s another big issue that that gap does not incorporate,” Elliot said. “It ultimately depends on what the state does, and we don’t know where they’re at yet. That will have a lot of ripple effect.”